Women empowerment

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WOMEN EMPOWERMENT THROUGH MICRO FINANCE-:
TURNING CHALLENGES INTO OPPORTUNITIES
Rashmi Ranjan Panigrahi1
April 2013
Paper type: Empirical Paper
ABSTRACT
This conceptual paper indicates and emphasizes the women entrepreneurs as the potentially
emerging human resource in the 21st century to overcome the economic challenges in global
perspective. Women of 21st century is no more a traditional resource confined to homes only
rather an educated, knowledgeable and innovative part of the overall population possessing the
capacity to transform economies into thriving enterprises. Microfinance is often used to refer to
financial services for poor and low-income clients. In practice, its definition is narrowed down to
loans and other services from providers identifying themselves as "microfinance institutions,"
(MFIs). More broadly, microfinance is a movement envisioning a world where low-income
households have permanent access to variety of high-quality financial services, including
savings, insurance and money transfers. Between the 1950s and 1970s, governments and donors
concentrated on providing agricultural credit to small and marginal farmers in a bid to raise
productivity and incomes. In the middle of the 1990s, "microfinance," started to replace the term
"microcredit," referring to a range of financial services to the poor, not just credit. Government
can support microfinance by setting sound macroeconomic policy, providing stability and low
inflation. Microfinance sector is having a healthy growth rate, there have been a number of
concerns related to the sector, like grey areas in regulation, transparent pricing, low financial
literacy etc. Developing and developed nations have realized that developing women
entrepreneurship is indispensible to flourish as economically dominant nation in the modern
high-tech world. Therefore, creation of platforms and networks for entrepreneurial culture are
prominent issues globally.
Research design and Methodology: This is a concept paper and the researcher has adopted the
method of reviewing different research articles, research journals, and case studies, to collect
data about entrepreneurship and woman entrepreneurship which is consequently incorporated as
a concept paper drafted by the researcher.
Research Limitation:
Key Words: Entrepreneur: Challenges: Opportunities
1 .*Asst.Prof.Rashmi Ranjan Panigrahi- Finance, Dept- MBA/ MFC (Master of
Finance and Control)/ MCOM -Education, ARYA SCHOOL OF MANAGEMENT & IT,
Bhubaneswar-751019, Contact Details: 9778789570, panigrahirashmi176@gmail.com.

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Introduction to Microfinance
To most, microfinance means providing poor families with very small loans (microcredit) to help
them engage in productive activities to grow their tiny businesses. Over a period of time,
microfinance has come to include a broader range of services (credit, savings, insurance and
others) as it has been realized that the poor, who lack access to traditional formal financial
institutions require a variety of financial products. Microfinance started with the recognition
that poor people had the capability to lift themselves out of poverty if they had access to
affordable loans. High repayment rates in the industry have changed the perception that the
poor are not credit worthy. With the right opportunities, the poor have proved themselves to
be productive and capable of borrowing, saving and repaying, even without collateral. Find out
more about microfinance in this section.
Concept of Micro-finance: Micro-finance is a tool for empowerment of the poorest. Delivery is
normally through Self Help Groups (SHGs). It is essentially for promoting self-employment,
generally used for: (a) direct income generation. (b) Rearrangement of assets and liabilities for
the household to participate in future opportunities and (c) Consumption smoothing. It is not
just a financing system, but a tool for social change, especially for women. Because micro credit
is aimed at the poorest, micro-finance lending technology needs to mimic the informal lenders
rather than the formal sector lending. It has to:
(a) Provide for seasonality
(b) Allow repayment flexibility
(c) Fix a ceiling on loan sizes.

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Microfinance approach is based on certain proven truths which are not always recognized.
These are:
1. That the poor are bankable; successful initiatives in micro finance demonstrate that
there need not be a tradeoff between reaching the poor and profitability - micro finance
constitutes a statement that the borrowers are not ‘weaker sections’ in need of charity,
but can be treated as responsible people on business terms for mutual profit .
2. That almost all poor households need to save, have the inherent capacity to save small
amounts regularly and are willing to save provided they are motivated and facilitated to
do so.
3. That easy access to credit is more important than cheap subsidized credit which involves
lengthy bureaucratic procedures - (some institutions in India are already lending to
groups or SHGs at higher rates - this may prevent the groups from enjoying a sufficient
margin and rapidly accumulating their own funds, but members continue to borrow at
these high rates, even those who can borrow individually from banks).
4. 'Peer pressure' in groups helps in improving recoveries.
OBJECTIVE OF THE STUDY
This paper objective to clarify these issues within the context of the debate about gender
Mainstreaming. The paper is based on research conducted by various authors and
secondary source material.
MICROFINANCE SECTOR IN INDIA
History and Evolution
The evolution of Indian MF can be broadly divided into four distinct phases:
Phase 1: The cooperative movement (1900-1960)
During this phase, credit cooperatives were vehicles to extend subsidized credit to villages
under government sponsorship.
Phase 2: Subsidized social banking (1960s – 1990)
With failure of cooperatives, Government focused on measures such as nationalization of
Banks, expansion of rural branch networks, establishment of Regional Rural Banks (RRBs) and
the setting up of apex institutions such as the National Bank for Agriculture and Rural

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Development (NABARD) and the Small Scale Industries Development Bank of India (SIDBI),
including initiation of a government sponsored Integrated Rural Development Programme
(IRDP). While these steps led to reaching a large population, the period was characterized by
large scale misuse of credit, creating a negative perception about the credibility of micro
borrowers among bankers, thus further hindering access to banking services for the low-income
people.
Phase 3: SHG-Bank linkage program and growth of NGO-MFIs (1990 – 2000)
The failure of subsidized social banking triggered a paradigm shift in delivery of rural credit with
NABARD initiating the Self Help Group (SHG) Bank Linkage Programme (SBLP), aiming to link
informal women's groups to formal banks. The program helped increase banking system
outreach to otherwise unreached people and initiate a change in the bank’s outlook towards
low-income families from ‘beneficiaries’ to ‘customers’. This period was thus marked by the
extension of credit at market rates. The model generated a lot of interest among newly
emerging Microfinance Institutions (MFIs), largely of non-profit origin, to collaborate with
NABARD under this program. The macroeconomic crisis in the early 1990s that led to
introduction of the Economic Reforms of 1991 resulted in greater autonomy to the financial
sector. This also led to emergence of new generation private sector banks that would become
important players in the microfinance sector a decade later.
Phase 4: Commercialization of Microfinance: The first decade of the new millennium
Post reforms, rural markets emerged as the new growth drivers for MFIs and banks, the latter
taking interest in the sector not only as part of their corporate social responsibility but also as a
new business line. On the demand side, NGO-MFIs increasingly began transforming themselves
into more regulated legal entities such as NBFCs to attract commercial investment. MFIs set up
after 2000 saw themselves less in the developmental mould and more as businesses in the
financial services space, catering to an untapped market segment while creating value for their
shareholders. This overriding shift brought about changes in institutions' legal forms, capital
structures, sources of funds, growth strategies and strategic alliances.

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MICRO-FINANCE AND WOMEN'S EMPOWERMENT
There are four basic views on the link between micro-finance and
women's empowerment:
1. There are those who stress the positive evidence and are essentially optimistic about
the possibility of sustainable micro-finance programmes world-wide empowering
women;
2. Another school of thought recognizes the limitations to empowerment, but explains
those with poor programme design;
3. Others recognize the limitations of micro-finance for promoting empowerment, but see
it as a key ingredient as important in themselves within a strategy to alleviate poverty;
empowerment in this view needs to be addressed by other means;
4. Then there are those who see micro-finance programmes as a waste of resources.
Underlying are three ‘paradigms’ on micro-finance and gender.
A, FINANCIAL SELF-SUSTAINABILITY PARADIGM: currently dominant within most donor
agencies and in the models of micro-finance promoted in publications by USAID, World Bank,
UNDP, CGAP and the Micro-credit Summit Campaign. Here the main consideration in
programme design is provision of financially self-sustainable micro-finance services to large
numbers of poor people, particularly micro- and small entrepreneurs. The focus is on setting of
interest rate “right” to cover costs, to separate micro-finance from other interventions to enable
separate accounting, to expand programmes so as to capture economies of scale, to use groups to
decrease costs of delivery. Gender lobbies have been able to argue for targeting women on the
grounds of high female repayment rates and contribution of women‟s economic activity to
economic growth. In this paradigm, it is assumed that increasing women‟s access to micro-
finance services will in itself lead to individual economic empowerment, well-being and social
and political empowerment.
B, POVERTY ALLEVIATION PARADIGM: underlies poverty-targeted programmes. Here the
main Considerations are poverty reduction among the poorest, increased well-being and
community development. The focus is on small savings and loan provision for consumption And
production, group formation, etc. This paradigm justifies some level of subsidy for Programmes
working with particular client groups or in particular contexts. Some programmes have
developed effective methodologies for poverty targeting and/or operating in remote areas.

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Gender lobbies in this context have argued for targeting women, becauseof higher levels of
female poverty and because of women‟s responsibility for householdwell-being. Poverty
alleviation and women‟s empowerment are seen as two sides of the same coin. The assumption is
that increasing women‟s access to micro-finance (together with other interventions to improve
household well-being) will in itself increase Household income which will then translate into
improved well-being for women and Women to bring about wider changes in gender inequality.
C, FEMINIST EMPOWERMENT PARADIGM: underlies the gender policies of many NGOs and
the perspectives of some of the consultants and researchers looking at gender impact of
microfinance programmes (eg Johnson, 1997). This paradigm did not originate as a Northern
imposition. It is rooted in the development of some of the earliest micro-finance programmes
in the South, particularly SEWA and WWF in India. Here the underlying concerns are gender
equality4 and women’s human rights. Micro-finance is promoted as an entry point in the
context of a wider strategy for women’s economic and socio-political empowerment. The focus
here is on gender awareness and feminist organization. Some programmes have developed
very effective means for integrating gender awareness into programmes and for organizing
women and men to challenge and change gender discrimination. Some also have legal rights
support for women and engage in gender advocacy.
Women Participation in India
Comparative study of Women Work Participation in India
The problem of disparity between the women and men in socio economic behavior of the society
and participation in employment are crucial issue in a developing country like India. In addition,
one of the most conspicuous phenomena of recent times has been the increasing participation of
women in paid work and casual work with decreasing participation in self employment work
(Mazumdar & N., 2011) and it has been driving employment trends and the gender gaps in paid
work employment have been shrinking. This section gives a detail of gap between men and
women on the basis of work force participation ratio and labour force participation ratio. Chart 1
shows change in the female workforce participation in India. The chart clearly shows that except
2000-05 and 1988-94 (except there was fall in rural female workforce on principal status) female
workforce participation rate (WPR) has decreased in India. It has decreased very sharply
between 2005-08 and 2005-10.The chart indicates the burning fact that employment
opportunities for the female has decreased in India. Rural female have been affected more than
urban females in India. The gap between male and female workforce has decreased till 2004-05
but it has increased in 2005-2010 in rural and urban India. The differences between the daily

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status and usual status WPR were larger for females than for males. The trends in urban areas are
also similar, but the gap between the male and female WPR is higher than that in rural areas.
Chart 1
Change in Female work Force Participation Rate in India
Table 1 It gives a detail of labour force participation rate for different age-wise. Table 1 and chat
2 shows that except urban male at the age group of 55-59 labour force participation rate at all
the age group in both sexes has reduced between 2004-2005 and 2009-2010. But when we see
the sex wise decline in LPWR, it is very high in female comparison to male. The decline in LPWR
is very high in the age group 20-45 (which is significant part of the working age). Definitely
present concerns suggest that economic growth has failed to generate sufficient employment
and decline in job Opportunities seems to be very high for female in India.
Table1
Age-Specific Labour Participation Rate in India according to usual status
(principal and subsidiary status) (in % age 15-59)
2004-05 2009-2010
Age Rural
Male
Rural
Female
Urban
Male
Urban
Female
Rural
Male
Rural
Female
Urban
Male
Urban
Female
15-19 52.9 33.1 38.1 14.4 39.0 19.5 26.3 8.5
20-24 89.1 43.5 76.9 25.0 81.3 31.4 68.2 19.7
25-29 98.2 53.0 95.7 26.1 97.5 40.5 94.7 22.2
30-34 98.8 59.3 98.7 30.8 99.0 43.4 98.5 23.9
35-39 99.1 64.2. 98.4 34.0 99.2 49.7 99.1 27.8
40-44 98.5 62.7 98.3 31.7 99.4 49.8 98.7 25.6

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1 Data is given in appendix table 1.
2 The decline in the LFPR for women, irrespective of age, might be because of a decline in
overall employment opportunities ( Chowdhury, 2011).
Table2
Percentage of Population in the Labour-Force (in percentage for age 15-59)
Year Rural India Urban India All India
Male Female Male Female Male Female
1983 91.1 45.1 88.6 23 90.5 40
1993-94 92 53.1 82.4 22.5 90.2 46.5
1999-00 87 45.2 82.4 22.5 85.6 38.9
2004-05 86 44.7 82.7 24.3 85.5 38.6
2009-10* 77.8 25.6 76 17.8 77.3 23.4
Source: Bhalla & Kaur, * Data have been taken from NSS 66th round
report
Note: 1) Labour force refers to the 15-59 age group that reports that they are working, or
looking for work according to the 'weekly status' definition of employment.
Table 2 shows percentage of population (age 15-59) engaged in labour force in all India as well
as urban and rural area from 1983 to 2009-2010. The chart 3 revels little different fact the
gender gap in labour force participation has decreased in urban female since 1983 but the gap
has increased in rural and at all India level in India since 1993-94. This depicts that men
contribute more work in comparison to women and the Chart 4 shows that the percentage of
women population in labour force tend to decline in rural area in all the period except between
1983-94. This is interesting, that during the period of liberalization and regularization of
economy it has been assumed that the women will come more freely and in huge number to
labour market. On the other hand, in urban area, the percentage of female labour force has
declined in all period except 2000-05. This picture clear that in urban area where female are
more literate, skilled/trained the share of female labour force in total population is high while it
has reduced significantly in 2005-10. The analysis clearly indicate that definitely urban female
are more educated and well trained, so their position in job market has improved but on the
other it has not resulted in terms of huge employment for the female in India.
MICRO FINANCE INSTRUMENT FOR WOMEN’S EMPOWERMENT
Micro Finance is emerging as a powerful instrument for poverty alleviation in the new economy.
In India, micro finance scene is dominated by Self Help Groups (SHGs) – Bank Linkage

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Programme, aimed at providing a cost effective mechanism for providing financial services to
the “unreached poor”. Based on the philosophy of peer pressure and group savings as collateral
substitute , the SHG programme has been successful in not only in meeting peculiar needs of the
rural poor, but also in strengthening collective self-help capacities of the poor at the local level,
leading to their empowerment.
Micro Finance for the poor and women has received extensive recognition as a strategy for
poverty reduction and for economic empowerment. Increasingly in the last five years , there is
questioning of whether micro credit is most effective approach to economic empowerment of
poorest and, among them, women in particular. Development practitioners in India and
developing countries often argue that the exaggerated focus on micro finance as a solution for
the poor has led to neglect by the state and public institutions in addressing employment and
livelihood needs of the poor.
Credit for empowerment is about organizing people, particularly around credit and building
capacities to manage money. The focus is on getting the poor to mobilize their own funds,
building their capacities and empowering them to leverage external credit. Perception women is
that learning to manage money and rotate funds builds women‟s capacities and confidence to
intervene in local governance beyond the limited goals of ensuring access to credit. Further, it
combines the goals of financial sustainability with that of creating community owned
institutions.
Before 1990‟s, credit schemes for rural women were almost negligible. The concept of women‟s
credit was born on the insistence by women oriented studies that highlighted the discrimination
and struggle of women in having the access of credit. However, there is a perceptible gap in
financing genuine credit needs of the poor especially women in the rural sector.
There are certain misconception about the poor people that they need loan at subsidized rate of
interest on soft terms, they lack education, skill, capacity to save, credit worthiness and therefore
are not bankable. Nevertheless, the experience of several SHGs reveal that rural poor are actually
efficient managers of credit and finance. Availability of timely and adequate credit is essential
for them to undertake any economic activity rather than credit subsidy.
The Government measures have attempted to help the poor by implementing different poverty
alleviation programmes but with little success. Since most of them are target based involving

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lengthy procedures for loan disbursement, high transaction costs, and lack of supervision and
monitoring. Since the credit requirements of the rural poor cannot be adopted on project lending
app roach as it is in the case of organized sector, there emerged the need for an informal credit
supply through SHGs. The rural poor with the assistance from NGOs have demonstrated their
potential for self help to secure economic and financial strength. Various case studies show that
there is a positive correlation between credit availability and women‟s empowerment.
Preference employment & business sectors by women entrepreneurs and their
contribution in economic growth
Women by nature preferably choose to work in service sector like education, social services and
household services such as domestic work. But at the same time the start up motivations vary
from industry to industry. Birley, (1989).
For a woman entrepreneurship is way out of economic disparity and toward empowerment. Her
entrepreneurship contributes positively in various dimensions and aspects in economic
development and job creation. Gundry and welsch, (2001).
Positive projection of entrepreneurial activity in a country should be an integral element of any
government agency in order to boost economic prosperity which is subsequently a way out of
poverty & economic crisis.
Adult women representing a large group of the overall population in each country is a readily
available pool of potential entrepreneurs that can generate economic growth activity to improve
their overall economies. However, the countries do differ in stages of development, demographic
patterns & different labor conditions. Stevenson, (1986).
Women entrepreneurship is expanding around the world. Studies have shown that women owned
businesses comprise between one-quarter and one-third of businesses in the formal economy &
are likely to play and even greater role in informal sectors. Gem report, (2007).
Role Modeling Opportunities
Extensive role modeling opportunities need to be introduced to encourage and guide women
entrepreneurs. Women entrepreneur’s success stories can be used as a useful and motivational
resource for this purpose. Bowen, (1986). Modern technological age has many such useful tools
to promote such role modeling programs like video conferencing, videos of successful
entrepreneur by having one to one sessions with successful women entrepreneurs and
entrepreneurship as a vibrant method to overcome economic disparity.

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Small Medium Size Enterprise Development Platforms
Entrepreneurship is now considered as the back bone of economic development which is
major challenge globally felt by even the developed nations today. Such multi-dimensional
platforms can serve as functional platforms and resource generation avenues for women
entrepreneurs in their startup business phase. Establishment of such platforms not only just
encourage women entrepreneurs to enter into business ventures but at the same time provide
them a healthy learning and training opportunities for their emotional and social development
as well. Bruni, gherardi and poggio, (2004). One such venture is the creation of wbic (women
business incubation center) as a sub-project of smeda pakistan with a close association with
chamber of commerce and industry.
Social entrepreneurship development
Social entrepreneurship is another very valuable and creative concept in entrepreneurship.
The need for such social entrepreneurs is felt globally more and more with the period of time.
Riding, orser, barbara and manley, (2006). Women need to be encouraged to become social
entrepreneurs to exploit the community needs as their future business ventures.
Such social entrepreneurial opportunities are very much there in every community and
especially in developing countries to overcome their disparity and poverty issues. Like clean
water supply to poverty ridden areas, very competitive education delivery to children and
adults, cottage industries in rural areas for women to manage their home expenses, health
incentives in rural areas etc.
PROBLEM AND CHALLENGES
Surveys have shown that many elements contribute to make it more Difficult for women
empowerment through micro businesses. These elements are:
Lack of knowledge of the market and potential profitability, thus
Making the choice of business difficult.
Inadequate book-keeping.
Employment of too many relatives which increases social pressure to share benefits.
Setting prices arbitrarily.
Lack of capital.
High interest rates.
Inventory and inflation accounting is never undertaken.

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Credit policies that can gradually ruin their business (many customers cannot pay cash;
on the other hand, suppliers are very harsh towards women).
Other shortcomings includes,
1. Burden of meeting: Time consuming meetings, in particular in programmes based on
group lending, and time consuming income generating activities without reduction of
traditional responsibilities increase women‟s work and time burden.
2. New Pressures: By using social capital, in-group lending/group collateral programmes,
additional stresses and pressures are introduced, which might increase vulnerability and
reflect disempowerment.
3. Reinforcement of traditional gender roles : lack of economic empowerment: Micro
finance assists women to perform traditional roles better and women thus remain trapped in
low productivity sectors, not moving from the group of survival enterprises to micro-
enterprises.There are evidence of men withdrawing their contributions to certain types of
household expenditures.
CHALLENGING ECONOMIC EMPOWERMENT
However impact on incomes is widely variable. Studies which consider income levels find that
for the majority of borrowers income increases are small, and in some cases negative. All the
evidence suggests that most women invest in existing activities which are low profit and insecure
and/or in their husband‟s activities. In many programmes and contexts it is only in a minority of
cases that women can develop lucrative activities of their own through credit and savings alone.
It is clear that women‟s choices about activity and their ability to increase incomes are seriously
constrained by gender inequalities in access to other resources for investment, responsibility for
household subsistence expenditure, lack of time because of unpaid domestic work and low levels
of mobility, constraints on sexuality and sexual violence which limit access to markets in many
cultures.
These gender constraints are in addition to market constraints on expansion of the informal
sector and resource and skill constraints on the ability of poor men as well as women to move up

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from survival activities to expanding businesses. There are signs, particularly in some urban
markets like Harare and Lusaka that the rapid expansion of micro-finance programmes may be
contributing to market saturation in „female‟ activities and hence declining profits.
Conclusion
Entrepreneurship is presently the most discussed and encouraged concept all over the world to
overcome economic challenges. Women being the vital gender of the overall population have
great capacity and potential to be the contributor in the overall economic development of any
nation. Therefore, programs and policies need to be customized to not just encourage
entrepreneurship as well as implement strategies which can help support entrepreneurial
culture among youth.
Developing countries are definitely in dire need to encourage women entrepreneurship as
women workforce is promptly available to exploit the unexplored dimensions of business
ventures. Developed nations should primarily focus on entrepreneurial educational programs in
order to develop women entrepreneurs.
Media has the potential to play the most vital role in entrepreneurial development by creating
and highlighting all such platforms which can bring out the creativity and innovation among the
women and men to grow entrepreneurship culture in society.
Generally speaking, globally business world has realized and is working on war footing to create
entrepreneurship as the final remedy to overcome all types of business and market challenges.
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8. MICRO ENTERPRISE DEVELOPMENT AND RURAL WOMEN ENTREPRENEURSHIP: WAY FOR ECONOMIC
EMPOWERMENT